Icahn vs. Netflix: It’s going to get ugly

FORTUNE — In 2004, activist investor — what used to be known as corporate raider — Carl Icahn made his move on Blockbuster, then the leading video-rental business. He was moved in part by a report from analyst Michael Pachter of Wedbush Securities, who had decided that the upstart Netflix NFLX didn’t represent much of a threat. Blockbuster either could buy Netflix or crush it with its own online-rental service, then under development, Pachter believed. Seven years, millions of dollars and one bankruptcy later, Icahn declared that Blockbuster was the “worst investment” he had ever made.

Now, Icahn is moving on Netflix, which is having troubles of its own. This time, Pachter thinks Icahn is making a big mistake. Icahn believes that Netflix is ripe for takeover, but Pachter says he’s “completely wrong” about that. None of the potential acquirers — which he lists as Amazon AMZN, Verizon VZ, Apple AAPL, Microsoft MSFT, and the big media companies that own all the movies — have an incentive to shell out billions for a service they could build on their own, or already are, Pachter notes. And that’s if they even wanted to do so — Pachter says that neither Microsoft nor any of the media companies have any reason to buy their way into video streaming. Netflix’s market cap on Monday was $4.33 billion. Icahn no doubt would demand a hefty premium if he were able to grab control of Netflix.

That became less possible with Netflix’s decision to adopt a poison pill to stave off Icahn, who has acquired just short of 10% of the company, mostly in the form of options. If needed, Netflix will flood the market with stock, diluting its value. Icahn responded that the poison pill is an example of “poor corporate governance” because shareholders didn’t vote on the plan. Now he’s making moves designed to acquire shareholder support and board seats, which Netflix has vowed to resist. Netflix would swallow the poison pill the moment Icahn acquired 10% of the company — a threshold Icahn calls “low and discriminatory.”

It’s fascinating how the language of culture wars has seeped into the hostile-takeover business: “activist,” “discriminatory.” But of course Carl Icahn, as always, is looking out for the interests of Carl Icahn, and nobody else. Look for the fight to continue, and perhaps to grow bloody. Icahn has “a long track record of threatening proxy fights until he [gets] he way — usually in the form of an above-market payoff,” writes Gina Keating in her new book Netflixed, which relates the tale of Icahn’s attempt to take over Blockbuster.

Icahn won his proxy fight with Blockbuster, pushing out CEO John Antioco and gaining board seats for himself and his allies. In 2008, he pushed for the company to buy electronics retailer Circuit City, which never happened. In 2009, Circuit City ceased to exist, and in 2010, soon after Icahn left the board, the bankrupt Blockbuster was sold to Dish Network DISH for a measly $233 million.

If Netflix CEO Reed Hastings emerges victorious from his fight with Icahn, it won’t have been easy for him, no matter what happens. Poison pills do cure headaches. It’s too bad they’re also deadly.